How Do Political And Social Standards Influence US Accounting Standard Setting?

Normative accounting research has resulted accounting theories that are relevant for the setting of financial reporting standards (Mozes, 1992, p. 93). In this case, the FASB’s (U.S Financial Accounting Standard Board) call for normative research can be interpreted as a request for accounting researchers to investigate whether the user specific and decision-specific qualities that standard-setters require are present in the accounting data (Mozes, 1992, p. 93). A successful example of normative accounting

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

Generally accepted accounting principles (GAAP) allow companies wide latitude in the choice of accounting policies. After a firm chooses a set of accounting policies, current accounting rules permit changes from one alternative policy to another at the discretion of the management. Since reported accounting figures are widely used by a number of external parties, managers of firms have incentives to choose accounting policies in order to influence the behavior of these parties. A variety of managerial motives for

Even if uniformity were to be reached, the IOSCO disclosure standards do not encircle all of the information required of an easy access to cross-border capital markets.

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

Lobbing of commercial and political interests in the establishing of the standards is a fact, which leads to believe that there might be large groups of the financial information users, who are interested in the particular way of reporting. If it is beneficial to them and to the market without compromising any ethical issues related to the financial reporting, if the market gains from such interests, than the standards should be formed under such influence. The question is who is going to decide if there are benefits. I guess, this is the area where the real politic starts. At this level of decision making, I think there should be people free of any political or economic pressure. However, more often commercial and political interests do

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

Accounting standards are important. For example, if accounting is considered as the language of business, accounting standards are its grammar. Properly developed and implemented, they can encourage business expansion and help regulate the economic system. High-quality accounting standards can facilitate the flow of information from businesses to a range of different users. These include investors, banks, creditors, the revenue commissioners, regulators, employees and the general public. The availability of accounts prepared in accordance with recognized accounting standards encourages trade by promoting confidence in businesses.

Gray identified four widely recognised accounting values that can be used to understand a nation’s accounting practices, which are professionalism, uniformity, conservatism and secrecy (Doupnik & Perera, 2015, p. 37). Professionalism verses statutory control is understood to be the difference between a nation’s preference for either individual professional judgement and self-regulation

The accounting system in the US was strongly influenced by the SEC as opposed to a governmental influence. The SEC sells, exchanges and trades securities, protects investors while maintaining fair, orderly and efficient markets and ultimately facilitates capital formation (Pereira, 1992, p17). The US has the largest and one of the most important, stock exchanges in the world - the New York Stock Exchange located on Wall Street in New York City. This makes the US a huge market for investors world-wide. All investors would like to have access to certain facts about an investment before buying it and while holding it. In order to achieve this, the SEC requires all public firms and companies to disclose meaningful financial and other information to the public, to follow GAAP (SEC, 2007). Thus, any company that wishes to be a market in the SEC’s securities must register with the SEC. For those companies with foreign registrants, the SEC requires them to either report under US GAAP or to provide reconciliations to US GAAP (Nobes, p146, 2006). The SEC also requires public firms to follow GAAP in order to be audited. It is quite evident that most of American accounting is rule based, not government based. According to Nobes’ textbook, Comparative International Accounting, the commission since its inception has intended to limit the exercise of its accounting standard-setting authority to a supervisory role, permitting and encouraging the private sector, currently

Every Society has certain standards which ensure that its member’s action do not harm the same society. There are two types of standards, verbal standards which are not written down but are handed down for generation to generation. There are also written standards which are written down. These are hard to change, but much easier to apply than the verbal standards. In democratic state the main set of rules is called Constitution; these rules are generally followed by everyone. Constitution is a system of fundamental laws and principles outlining the nature and the functions of the government. But the question is an 18th century document; the U.S. constitution has been amended since then is still serving the purpose of the American consensus in the 21st century?

The United States is in fourth place in the world for ease of doing business, as reported by the World Bank’s “Doing Business 2010” report. Pro-business, as a rule, is the economic policy of the country and has a very well-developed competitive financial regulatory system with the financial markets. Differential federal tax rates and high tax rates are also the major dampeners for business. After several major corporate accounting scandals, such as Enron, Peregrine Systems and WorldCom, in 2002 US federal law adopted the Sarbanes-Oxley Act. This act is a set of new or improved public accounting standards for all US public company

The thought of a standards based way to deal with U.S. standard setting is not new. The Board 's reasonable system contains the collection of rule that underlies U.S. bookkeeping and reporting. The Board has utilized the reasonable system as a part of adding to the standards in bookkeeping measures for over 20 years. Then again, numerous affirm that the models have turned out to be progressively point by point and tenets based (with "splendid lines" and "on-off" switches that emphasis on the structure as opposed to the substance of exchanges), complex, and troublesome and exorbitant to apply. Numerous likewise affirm that the guidelines permit budgetary and bookkeeping building to structure exchanges "around" the principles, alluding to circumstances, for example, those in which complex structures or a progression of exchanges are made to accomplish sought bookkeeping results; for instance, to expel resources from the accounting report while holding the general financial matters of the benefits or to portray resources.

Similar to many other countries practicing under the common law system, the United States government does not directly set accounting standards, in the belief that the private sector has better knowledge and resources. US GAAP is not written in law, although

re-emerged as one of the hottest topics on the agenda of accounting standards setters both under